Posted by John Behle on October 27, 1998 at 24:33:10:
Protecting yourself when flipping notes is a challenge. People do it through Non-circumventure agreements or just through a trust relationship with their investor. Yet, one of my franchisees even had a case where an investor/note seller found out the funding source through the inquiry on the credit report and then went around the broker.
That’s another problem with flipping notes. Why not consider staying in the middle of the deal. You buy the notes through a corp,LLC,etc. and the investor just loans money against the notes. In your case he still could probably get through to the note seller, but he would lose out on the collections, problem solving skills and future note income that you sell him on. He lends to you because he trusts you.
Many of my investors have not wanted to own the notes themselves and are not prepared to collect on the notes, send out “nastygrams” if the people are late or deal with severe delinquency problems.
There’s an article about financing paper I posted. Read through that and you’ll see many of the advantages of staying in the middle.